40 duplexes & 6 apartment buildings in Cleveland, should I sell?

[Frank Wolter]

I have over 120 units. I'm noticing the high demand from out of state buyers especially from Cali. I see they are paying top dollar. I'm producing 30-50% returns considering I payed much less. Of course the returns won't be that high to my buyer. I know the buy low sell high saying but I love the cash flow. So should I keep them for the cash flow or sell and get top dollar and pay taxs on it? A 1031 would be hard due to prices higher. This has been something I've been on and off with for awhile. Just some other investors opinions. Ty

[Oren K.]

Marc & Jay have made some good point but I disagree about not being able to replace the return. It is not the % but the absolute number.

Using some made up numbers; Lets assume that the total purchase cost are $1,000,000 and the total return is $300,000 (30%).

So the questions become, how much equity will you have after the sale and what return can it generate. If it is now worth $3,000,000 and you can generate a real 10% ROI (with hopefully lower risk properties), you have replaced the income. As the real value of the portfolio increases, the ROI to generate the same income drops. Using leverage, 10% ROI on your equity is certainly not out of the question.

Figure out what the value of the portfolio is, what bundles might generate the highest interest / value, what returns you can reasonably expect for your new purchases (assuming you want to stay with real estate), etc. and see if the numbers work for you. 

Depending on your age / interests, as Jay suggested, perhaps you are willing to trade a lower income for less hands-on or you may want to take on a larger project or partner up with a syndication as a big partner or diversify away from real estate or whatever - It does open up possibilities.

Way to go and good luck,

Oren